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Green Accounting: A Greener Bottom Line?

RONDON DO PARA, BRAZIL - JUNE 08: An oven burns illegally harvested Amazon rainforest wood as it is turned into charcoal on June 8, 2012 in Rondon do Para, Brazil. According to a recent Greenpeace study, illegal wood charcoal is primarily used in Brazil to power smelters producing pig iron, which is used to make steel for industries including U.S. auto manufacturing. Illegal charcoal camps were found to sometimes result in slave labor and the destruction of rainforest on protected indigenous lands. Between 2003-2011, 2,700 charcoal camp workers were liberated from conditions akin to slavery, according to Greenpeace. The Brazilian Amazon, home to 60 percent of the world’s largest forest and 20 percent of the Earth’s oxygen, remains threatened by the rapid development of the country. The area is currently populated by over 20 million people and is challenged by deforestation, agriculture, mining, a governmental dam building spree, illegal land speculation including the occupation of forest reserves and indigenous land and other issues. Over 100 heads of state and tens of thousands of participants and protesters will descend on Rio de Janeiro, Brazil, later this month for the Rio+20 United Nations Conference on Sustainable Development or 'Earth Summit'. Host Brazil is caught up in its own dilemma between accelerated growth and environmental preservation. The summit aims to overcome years of deadlock over environmental concerns and marks the 20th anniversary of the landmark Earth Summit in Rio in 1992, which delivered the Climate Convention and a host of other promises. Brazil is now the world’s sixth largest economy and is set to host the 2014 World Cup and 2016 Summer Olympics. (Image credit: Getty Images via @daylife)

Bean counters of the world take note: Fish will be about 24% smaller by 2050 due to global warming and greenhouse-gas emissions, according to a report in the journal Nature Climate Change (call out to the Los Angeles Times for spotting it).

It’s a small fact, no pun intended, but a very telling one about the problems the planet—and its countries and businesses within those countries–will be facing in the coming years because of climate change. It’s also the type of fact that accountants and CFOs may well have to consider in the coming years. Indeed, climate change is more than just an “environmental issue” — it has a direct impact on a company’s bottom line. The most stark illustration of that is a factoid provided by the Climate Vulnerability Monitor that the United States could lose more than 2% of its GDP as it fights droughts and water shortages (call out, this time, to US News & World Report). Already in 2010, climate change caused economic losses estimated close to 1% of global GDP, or $700 billion.

Good Steps, But Ultimately How Helpful?

Some companies are taking action. Google, for instance, is buying wind power to help run its data centers, and WalMart is building wind turbines for its distribution centers. Google, in particular, is pushing the envelop: specifically, late last month it inked a first-of-its-kind deal with Grand River Dam Authority, an Oklahoma utility, to buy 48 megawatts of wind energy to help power its data center in that state.

Walmart’s project is nothing to sniff at either: in August it unveiled plans for its first onsite large-scale wind turbine pilot project at its distribution center in Red Bluff, Calif. The wind turbine is expected to be operational by this fall, and provide roughly one megawatt of power–or 15 to 20%–of the distribution center’s yearly electrical use.

The Push for Green Accounting

Such measures are to be applauded, but they are widely recognized as not enough, given the magnitude of what is happening.

Enter green accounting, a growing movement that has the backing not only of environmentalists but some top global corporations. To greatly simplify it, green accounting puts a dollar value on natural resources in order for business and political leaders to make more informed decisions. The AP, which covered this past summer’s Rio Earth Summit, does a great job of explaining it and its progress around the globe.

A Materiality Map

This progress is continuing–as can be seen by last week’s announcement that the Sustainability Accounting Standards Board has been founded.

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